While the Indian IT industry may have bottomed out in the March-June quarter of 2024, recovery remains slow and uncertain, believes Surendra Goyal, Head of India Research, Citi. He pointed to weak deal flow numbers and shifting spending priorities as key factors hindering a rebound.
Deal flow numbers have been weak across companies, and there isn't enough visibility to confidently call a recovery in the sector, said Goyal to NDTV Profit, adding that Indian IT firms face a trifecta of challenges that limit near-term growth prospects.
The pace of share gains for Indian IT companies has significantly slowed, denting the momentum seen in prior years, said Goyal. Client spending priorities have shifted sharply toward generative AI, a space that Indian IT is still navigating, leaving room for global competitors to seize opportunities, he noted.
Adding to the concerns, the sharp rise in US 10-year yields—up 80–90 basis points in the last month—has intensified macroeconomic pressures on IT budgets, stated Goyal.
While some IT stocks have shown resilience, Goyal cautioned that these are "already richly priced," limiting upside potential. Despite the overall cautious stance, he expressed a relative preference for Infosys and HCL Tech.
For now, the Indian IT sector remains in a wait-and-watch mode, with a modest but slow recovery likely.
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